WASHINGTON (AP) — Livestock farmers and ranchers seeing their feed costs
rise because of the worst drought in a quarter-century are demanding that
the Environmental Protection Agency waive production requirements for
corn-based ethanol.

The Obama administration sees no need for a waiver, siding with corn growers
— many of them in presidential election battleground states Iowa and Ohio —
who continue to support the mandate.

“If not now, when?” Randy Spronk, a Minnesota pork farmer, said of the EPA’s
authority to defer the ethanol production requirement when it threatens to
severely harm the economy of a state or region. “Everyone should feel the
pain of rationing.”

Spronk, who is president-elect of the National Pork Producers Council, said
livestock producers will have to reduce their herds and flocks because feed
is becoming scarce and too expensive. Cattlemen and chicken farmers have the
same concern.

“We do support the American ethanol industry,” said Kristina Butts,
executive director of legislative affairs at the National Cattlemen’s Beef
Association. “All we are asking for is that competition for that bushel of
corn be on a level playing field.”

The government, she said, “is picking the ethanol industry to be the winner
to get that bushel of corn.”

The Renewable Fuel Standard, enacted in 2005 and then significantly expanded
in 2007, requires that 13.2 billion gallons of corn starch-derived biofuel
be produced in 2012. The intent was to reduce both greenhouse gas emissions
blamed for climate change and dependence on foreign oil.

One consequence is that 40 percent of the nation’s corn crop now goes to
ethanol producers, compared with 36 percent for feed. The rest is divided
between processed food and exports. Critics say ethanol also is a big factor
in the price of a bushel of corn going from an average $2.15 a bushel in the
1997-2006 period to more than $8 today.

With half the nation’s corn crop now in poor condition, “relief from the
Renewable Fuel Standard is extremely urgent because another short corn crop
would be devastating to the animal agriculture industry, food manufacturers,
food service providers, as well as consumers,” 156 House members wrote EPA
Administrator Lisa Jackson in urging her to issue a waiver. Twenty-five
senators, about evenly divided between the two parties, wrote a similar
letter to Jackson this week.

The House letter was signed mainly by Republicans, who are outspoken in
their opposition to EPA regulations. But as with the Senate, the majority of
signees were from the South, where the poultry industry is strong, with
others coming from Western cattle states and Northern dairy states.
Midwestern corn states like Iowa and Ohio were largely unrepresented.

It’s more complicated for people like Kevin Ross, who raises corn and
soybeans in southwest Iowa and heads the Iowa Corn Growers Association.
Losing the ethanol market, he said, would definitely hurt his business.
Having another major market for corn, he said, “has had an effect on the
rural economy that’s not been seen in decades. ... I really hope we don’t
make any rash decisions about it.”

Ross and others pointed to a study by Iowa State economist Bruce Babcock
concluding that because of the flexibility built into the current mandate
system, removing the ethanol requirement would only decrease corn prices by
about 28 cents a bushel, or 4.6 percent.

In an interview with The Associated Press, Babcock cautioned that at this
point no one knows what the final corn yield will be. But if it drops
dramatically from current projections, his estimate for the impact of
suspending the mandate would go up. “The worse the corn crop, the bigger
will be the effect on corn prices.”

The ethanol industry, backed by the Obama administration, says it’s unfair
to blame it for turmoil in the corn market. Tom Buis, CEO of Growth Energy,
which represents producers and supporters of ethanol, said at a recent news
conference that he’d “never heard a bigger whopper” than the argument that
fuel demands were hurting food supplies.

The ethanol industry argues that the Agriculture Department’s estimate that
ethanol consumes a 40 percent share of the corn market is misleading because
about a third of the ethanol corn is refined into a high-value animal feed
called dried distiller grain. Buis said ethanol’s actual share of the corn
crop as a fuel is closer to 16 percent.

Renewable Fuels Association CEP Bob Dinneen also pointed out that there is
flexibility built into the system. For example, ethanol produced one year
but not used can be carried over to the next year. He said ethanol
production has always been above what was required and that this year, with
supplies down and prices up, producers are already slowing production.

Agriculture Secretary Tom Vilsack echoed that at a White House briefing last
month, saying: “There’s no need to go to the EPA at this point in time.
Based on the quantity of ethanol that’s currently in storage, there’s no
problem in that area at this point in time.”

He also pointed out that despite the drought, the corn crop could still be
one of the larger ones in history because farmers, enticed by high prices,
planted so many acres this spring.

The EPA also turned down a request by Texas Gov. Rick Perry in 2008 to waive
the mandate because of drought in his state.

C. Larry Pope, president and CEO of Smithfield Foods Inc., the world’s
largest pork producer, said in a July 26 Wall Street Journal opinion piece
that Congress should pass a House proposal that would tie the Renewable Fuel
Standard percentage to free-market supply and demand. He said that with the
ethanol mandate and the high price of corn, “Smithfield was forced to take
the unfortunate but absolutely necessary step of buying corn from Brazil.”

That brought a quick retort from Sen. Charles Grassley, R-Iowa, who went to
the Senate floor to compare Pope to Henny Penny, the character from the
children’s story “Chicken Little” who warned everyone that the sky was
falling.